Brendan Duddy played a critical role in reducing tensions between loyalist marchers and residents in Derry.
Photograph: Niall Carson/PA

The businessman Brendan Duddy’s life was in many ways intertwined with the fortunes of his fellow Derry citizen Martin McGuinness, the former IRA chief of staff turned republican negotiator. Duddy, who has died aged 80, was trusted enough by McGuinness to establish what became known as “the link” and later as “the back channel”, between the IRA leadership in Derry, principally McGuinness, and the British government, via secret MI6 contacts.

Duddy had known McGuinness since the late 1960s, when the latter used to deliver beefburgers from the butcher’s where he worked to Duddy’s fish and chip shop in Derry. Many years later, Duddy recalled to the veteran BBC reporter Peter Taylor that the youthful McGuinness came to his premises “to chat up the girls behind the counter and had absolutely no interest in politics”.

The storm that broke over their home city from 1969 onwards, from the Battle of Bogside to internment and then on to the slaughter on Bloody Sunday in 1972, propelled McGuinness into and upwards through the ranks of the nascent Provisional IRA. Duddy, on the other hand, eschewed the use of political violence and instead built up a business mini-empire in a city that by the mid-1970s was being bombed relentlessly by the Provisionals under the orders of commanders including McGuinness.

Yet despite diverging from McGuinness in terms of the “armed struggle”, as republicans call it, Duddy maintained close, friendly relations. From 1975 – the first major Provisional IRA ceasefire – Duddy belonged to a tripartite process that played a crucial part eventually in ending Northern Ireland’s Troubles and ushering in the peace process.

Despite the failure to secure a lasting IRA end to violence in the mid-1970s, Duddy and the rest of “the link” resurrected the secret discussions in 1980 to help end the hunger strike taking place in the Maze prison, which a year later resulted in the deaths of seven IRA prisoners and three Irish National Liberation Army inmates. During these negotiations Margaret Thatcher and her cabinet were fully briefed by the MI6 operatives involved in the talks, despite the Tories’ official policy of not talking to terrorists.

Nine years later, Duddy was again involved in secret talks, again based in Derry, that included the MI6 officer Michael Oatley, who had made previous fruitless attempts to contact McGuinness via the businessman. However, the 1990 talks would eventually produce favourable results despite “the link” being exposed in the Observer three years later, again exposing the dichotomy between another Tory government’s official policy of no dialogue with terrorists while all the time agreeing to covert discussions with the IRA.

The exposure of “the link” almost led to the negotiations being fatally compromised by one key sentence contained in communications between the IRA and the British. A note allegedly from the IRA leadership told the British “The conflict is over. Help us to end it.”

When these words became public, McGuinness and the rest of the Sinn Féin leadership furiously denied they were behind them, even though they had helped convince John Major’s administration the IRA was serious about ending its armed campaign. Duddy felt in mortal danger from hardline elements within the IRA. In fact it was Duddy’s fellow go-between Denis Bradley, the former priest who had officiated at McGuinness’s wedding, who had written those critical few words.

The first outcome of this secret triangular talks process was the creation of the Derry experiment, under which the IRA started to reduce its violence in the city, resulting in a situation where after 1990 there were no more British military casualties up to the Provisionals’ ceasefire four years later.

Even after the IRA ceasefire was secured, and the peace process bedded in, Duddy continued to act as a go-between, bringing together old adversaries. He played a critical role in helping to reduce tensions between the Ulster loyalist marching orders and republican residents’ groups in Derry over contentious parades in the city. Duddy won the trust of Orangemen and members of the Apprentice Boys of Derry. He helped create a Derry experiment Mark II, in which dialogue between the loyal orders and republican residents led to a series of local agreements, with the city inspiring other parts of Northern Ireland to follow suit.

Jonathan Powell, Tony Blair’s chief of staff, who in the post-ceasefire era held covert talks with IRA commanders, said had it not been for Duddy’s dogged pursuit of dialogue and of promoting talks with the British, there might not have been a peace process.

The son of Mary and Laurence Duddy, Brendan spent most of his adult life running the family fish and chip shop before creating a retail and property, hotel and entertainment business portfolio that generated hundreds of jobs in a city blighted by unemployment and IRA economic sabotage.

He is survived by his wife, Margo, and children, Patricia, Lawrence, Paula, Brendan, Shauna and Tonya, 21 grandchildren and nine great-grandchildren.